The White House may impose restrictions on the use of stablecoins under the pretext of combating money laundering and financial terrorism.
December 24, 2020 | AtoZ Markets – The Financial Regulation Working Group under the US Treasury Department has proposed tightening control over the circulation of stablecoins, citing the fact that these coins may pose a threat to monetary stability.
The authors of the document refer to the FATF and FinCEN recommendations regarding cryptocurrencies, including stablecoins pegged to the US dollar.
Here are just a few new rules that will come into force this year:
- registration of the issuer in the Financial Crimes Network (FinCEN);
- developing, implementing, and maintaining an effective program to combat money laundering;
- compliance with accounting and reporting requirements, including reporting of suspicious activity;
- development and implementation of individual sanctions based on compliance programs.
Stablecoin issuers must be willing to pay damages in a 1: 1 ratio
Special attention is paid to protecting the rights of stablecoin holders. As stated in the document, issuers of stablecoins must have a reserve of fiat currency in order to exchange stablecoins for US dollars or another currency in case of an unforeseen situation, at a rate of 1: 1 minus commissions and fees. At the same time, reserve assets must be held remotely and be protected from bankruptcy and from other creditors of the company.
“Stablecoins’ mechanisms should offer clear error resolution processes, protect users from fraudulent or misleading actions or practices, and protect user data,” the document says.
Despite the impending restrictions, the working group members recognize that digital payments, including USD-backed and other stablecoin schemes used as payment systems, can increase efficiency and competition, lower costs, and facilitate broader financial inclusion.
“The statement reflects a commitment to both promoting the important benefits of innovation and achieving critical goals related to national security and financial stability. Regulators will continue to closely monitor the stablecoin agreements and look forward to further dialogue on these issues,” said Deputy Finance Minister Justin Muzinich.
The working group included the US Treasury Secretary, Chairman of the Board of Governors of the Federal Reserve System, Chairman of the Securities and Exchange Commission, and Chairman of the Commodity Futures Trading Commission.
Earlier, the community criticized the decision of US lawmakers to impose restrictions on the issuance of private stablecoins, citing the protection of the rights of “people of different skin colors with low and middle income.”
Europe is also against stablecoins
The European Central Bank is also against the turnover of stablecoins. Earlier, the head of the ECB, Christine Lagarde, said that stablecoins could threaten the stability of the euro and its digital form, so she called on her colleagues to speed up the process of developing the CBDC.
“The digital euro will complement cash and ensure that consumers continue to have unlimited access to central bank money in a form that meets their growing digital payment needs, ” Lagarde said .
In September of this year, several EU member states at once advocated stricter regulation of the turnover of stablecoins. So, Germany, France, Italy, Spain, and the Netherlands called on the European Commission to increase pressure on issuers of stablecoins, arguing tightening “consumer protection” and “preservation of state sovereignty in monetary policy.”
Speaking of stablecoins, European politicians mean primarily the Libra stablecoin (recently rebranded to Diem), which can compete with all currently existing fiat currencies.
Despite the tightening of requirements, the capitalization of stablecoins is growing steadily. For example, the capitalization of USDC grew by 10%, and the capitalization of the stablecoin USDT exceeded $10 billion.
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